Tags: Buffett | P&G | Duracell | tax

Can You Save Money on Taxes Like Buffett Did?

By    |   Wednesday, 19 Nov 2014 08:14 AM

Warren Buffett recently agreed to acquire battery maker Duracell from Proctor & Gamble. The terms of the deal are fairly complex but seem to be motivated by tax savings.

Buffett will give P&G approximately $4.7 billion worth of P&G stock he already owns and he'll receive ownership of the Duracell division and $1.7 billion in cash that P&G is adding to Duracell's balance sheet.

Duracell is a great brand, but it seems likely Buffett is making this deal primarily to save on taxes.

Buffett has a cost basis of approximately $336 million for the shares he is giving back to P&G. Selling the stock would result in a tax bill of up to $1.7 billion for Buffett and this deal eliminates that tax liability. P&G also gets a tax benefit on the deal by using Duracell instead of cash to buy back its shares.

Can you reduce your taxes like Buffett did? In a word — no.

Individual investors have very limited access to this type of tax-reduction strategy. Individuals can give away shares of stock to charity or as a gift to avoid capital gains taxes. However, they cannot use shares to fund a retirement account or use the shares to make another investment like Buffett did. There are some ways to apply this idea to some real estate investments, but that opportunity is available to relatively few investors.

In other words, the rich are different than us in that they have access to tax breaks we don't have.

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MichaelCarr
Warren Buffett recently agreed to acquire battery maker Duracell from Proctor & Gamble. The terms of the deal are fairly complex but seem to be motivated by tax savings.
Buffett, P&G, Duracell, tax
249
2014-14-19
Wednesday, 19 Nov 2014 08:14 AM
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